TESTjBANKjFOR
FUNDAMENTAL FINANCIAL
jACCOUNTINGjCONCEPTSj1
1thjEDITIONjBYjTHOMAS
EDMONDSjALLjCHAPTERSj
INCLUDEDj2023/2024.
,Studentjname:j
1) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjmarketsjisjtruejorjfalse.
j a)jFinancialjresourcesjcanjbejprovidedjtojajbusinessjbyjinvestors.
j
b)jResourcejownersjarejthejbusinessesjthatjtransformjresourcesjintojproductsjtha
tjsatisfyjconsumerjdesires.
j
c)jLaborjresourcesjincludejbothjthejphysicaljandjintellectualjlaborjofjajbusiness'
sjemployees.
j d)jBusinessesjpurchasejtheirjresourcesjfromjresourcejowners.
j e)jConsumersjarejthejmainjprovidersjofjresourcesjinjanyjmarket.
2) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjaccountingjinformationjisjtruejo
rjfalse.
j
a)jFinancialjaccountingjisjprimarilyjintendedjtojsatisfyjthejinformationjneedsjo
fjinternaljstakeholders.
j
b)jManagerialjaccountingjinformationjincludesjfinancialjandjnonfinancia
ljinformation.
j
c)jThejaccountingjinformationjintendedjtojsatisfyjthejneedsjofjajcompany'
sjemployeesjisjmanagerialjaccountingjinformation.
j d)jGAAPjrequiresjthatjcompaniesjadherejtojfinancialjaccountingjstandards.
j
e)jManagerialjaccountingjinformationjisjusuallyjlessjdetailedjthanjfinancia
ljaccountingjinformation.
3) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjliabilitiesjisjtruejorjfalse.
j a)jAjnetjlossjonjthejincomejstatementjdecreasesjliabilities.
j b)jThejacquisitionjofjajbankjloanjincreasesjbothjassetsjandjliabilities.
j c)jThejaccountingjequationjrequiresjthatjliabilitiesjbejequaljtojstockholders’jequity.
j
d)jThejamountjofjajcompany'sjliabilitiesjisjequaljtojthejdifferencejbetweenjitsjasset
sjandjitsjstockholders’jequity.
j e)jLiabilitiesjarejreportedjonjthejstatementjofjcashjflowsjofjajbusiness.
,4) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjretainedjearningsjisjtruejorjfalse.
j a)jAjdividendjpaidjtojstockholdersjdecreasesjretainedjearnings.
j b)jIssuingjcommonjstockjforjcashjincreasesjretainedjearnings.
j c)jThejamountjofjnetjincomejforjajperiodjmustjequaljretainedjearnings.
j d)jThejpurchasejofjajtruckjdecreasesjretainedjearnings.
j e)jNetjincomejincreasesjretainedjearnings.
5) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjthejtypesjofjtransactionsjisjtru
ejorjfalse.
j a)jAnjassetjsourcejtransactionjincreasesjtotaljassetsjandjincreasesjclaimsjtojassets.
j
b)jThejissuancejofjstockjtojownersjforjcashjwouldjbejanjexamplejofjanjass
etjexchangejtransaction.
j c)jPurchasingjequipmentjforjcashjisjanjexamplejofjanjassetjusejtransaction.
j d)jPayingjajdividendjtojstockholdersjisjanjexamplejofjanjassetjusejtransaction.
j e)jMakingjajpaymentjonjajbankjloanjisjanjexamplejofjanjassetjexchangejtransaction.
6) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjfinancialjstatementsjisjtruejo
rjfalse.
j
a)jAjcashjdividendjpaidjtojstockholdersjisjreportedjinjthejinvestingjactivitiesjsectio
njofjthejstatementjofjcashjflows.
j
b)jAjcashjdividendjpaidjtojstockholdersjisjreportedjonjthejstatementjofjchangesji
njstockholders'jequity.
j c)jAjcashjdividendjpaidjtojstockholdersjisjreportedjonjthejincomejstatement.
j
d)jThejbalancejsheetjreportsjthejendingjbalancesjofjpermanentjaccountsjasjofjthejla
stjdayjofjthejaccountingjperiod.
j
e)jChangesjinjretainedjearningsjduringjthejaccountingjperiodjarejreportedjonjth
ejincomejstatement.
, 7) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjstockholders’jequityjisjtruejo
rjfalse.
j a)jExpensesjdecreasejretainedjearnings.
j
b)jStockholders'jequityjandjliabilitiesjcanjbejviewedjeitherjasjsourcesjofjassetsjo
rjclaimsjtojassetsjofjthejbusiness.
j c)jRetainedjearningsjisjincreasedjbyjloansjreceivedjfromjajbank.
j d)jDividendsjpaidjtojstockholdersjdecreasejcommonjstock.
j
e)jGenerally,jassetsjarejreportedjatjthejactualjpricejpaidjforjthemjwhenjpurchase
djregardlessjofjsubsequentjchangesjinjmarketjvalue.
8) JessupjCompanyjwasjfoundedjinjYearj1.jItjacquiredj$45,000jcashjbyjissuingjstockjtoji
nvestorsjandjanjadditionalj$15,000jcashjbyjborrowingjfromjcreditors.jDuringjYearj1jitjreceive
d
$25,000jcashjrevenuesjandjpaidj$32,000jinjcashjexpenses.jThejcompanyjthenjwentjoutjo
fjbusiness.
Required:
a) Explainjthejterm,j"businessjliquidation."
b) WhatjamountjofjcashjshouldjJessupjCompanyjhavejhadjonjhandjimmediatelyjbeforejgoin
gjoutjofjbusiness?
c) WhatjamountjofjcashjwilljJessup'sjcreditorsjreceive?
d) WhatjamountjofjcashjwilljJessup'sjstockholdersjreceive?
9) BatesjCompanyjenteredjintojthejfollowingjtransactionsjduringjitsjfirstjyearjinjbusines
s.jAssumejthatjalljtransactionsjinvolvejthejreceiptjorjpaymentjofjcash.
1) Issuedjcommonjstockjtojinvestorsjforj$25,000jcash.
2) Borrowedj$18,000jfromjthejlocaljbank.
3) Providedjservicesjtojcustomersjforj$28,000.
4) Paidjexpensesjamountingjtoj$21,400.
5) Purchasedjajplotjofjlandjcostingj$22,000.
6) Paidjajdividendjofj$15,000jtojitsjstockholders.
7) Repaidj$12,000jofjthejloanjlistedjinjitemj2.
Required:
(a) Filljinjthejthreejcolumnjheadingsjofjthejaccountingjequationjinjthejfirstjrowjofjthejtabl
ejshownjbelow.
(b) Showjthejeffectsjofjthejabovejtransactionsjonjthejaccountingjequation.
FUNDAMENTAL FINANCIAL
jACCOUNTINGjCONCEPTSj1
1thjEDITIONjBYjTHOMAS
EDMONDSjALLjCHAPTERSj
INCLUDEDj2023/2024.
,Studentjname:j
1) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjmarketsjisjtruejorjfalse.
j a)jFinancialjresourcesjcanjbejprovidedjtojajbusinessjbyjinvestors.
j
b)jResourcejownersjarejthejbusinessesjthatjtransformjresourcesjintojproductsjtha
tjsatisfyjconsumerjdesires.
j
c)jLaborjresourcesjincludejbothjthejphysicaljandjintellectualjlaborjofjajbusiness'
sjemployees.
j d)jBusinessesjpurchasejtheirjresourcesjfromjresourcejowners.
j e)jConsumersjarejthejmainjprovidersjofjresourcesjinjanyjmarket.
2) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjaccountingjinformationjisjtruejo
rjfalse.
j
a)jFinancialjaccountingjisjprimarilyjintendedjtojsatisfyjthejinformationjneedsjo
fjinternaljstakeholders.
j
b)jManagerialjaccountingjinformationjincludesjfinancialjandjnonfinancia
ljinformation.
j
c)jThejaccountingjinformationjintendedjtojsatisfyjthejneedsjofjajcompany'
sjemployeesjisjmanagerialjaccountingjinformation.
j d)jGAAPjrequiresjthatjcompaniesjadherejtojfinancialjaccountingjstandards.
j
e)jManagerialjaccountingjinformationjisjusuallyjlessjdetailedjthanjfinancia
ljaccountingjinformation.
3) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjliabilitiesjisjtruejorjfalse.
j a)jAjnetjlossjonjthejincomejstatementjdecreasesjliabilities.
j b)jThejacquisitionjofjajbankjloanjincreasesjbothjassetsjandjliabilities.
j c)jThejaccountingjequationjrequiresjthatjliabilitiesjbejequaljtojstockholders’jequity.
j
d)jThejamountjofjajcompany'sjliabilitiesjisjequaljtojthejdifferencejbetweenjitsjasset
sjandjitsjstockholders’jequity.
j e)jLiabilitiesjarejreportedjonjthejstatementjofjcashjflowsjofjajbusiness.
,4) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjretainedjearningsjisjtruejorjfalse.
j a)jAjdividendjpaidjtojstockholdersjdecreasesjretainedjearnings.
j b)jIssuingjcommonjstockjforjcashjincreasesjretainedjearnings.
j c)jThejamountjofjnetjincomejforjajperiodjmustjequaljretainedjearnings.
j d)jThejpurchasejofjajtruckjdecreasesjretainedjearnings.
j e)jNetjincomejincreasesjretainedjearnings.
5) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjthejtypesjofjtransactionsjisjtru
ejorjfalse.
j a)jAnjassetjsourcejtransactionjincreasesjtotaljassetsjandjincreasesjclaimsjtojassets.
j
b)jThejissuancejofjstockjtojownersjforjcashjwouldjbejanjexamplejofjanjass
etjexchangejtransaction.
j c)jPurchasingjequipmentjforjcashjisjanjexamplejofjanjassetjusejtransaction.
j d)jPayingjajdividendjtojstockholdersjisjanjexamplejofjanjassetjusejtransaction.
j e)jMakingjajpaymentjonjajbankjloanjisjanjexamplejofjanjassetjexchangejtransaction.
6) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjfinancialjstatementsjisjtruejo
rjfalse.
j
a)jAjcashjdividendjpaidjtojstockholdersjisjreportedjinjthejinvestingjactivitiesjsectio
njofjthejstatementjofjcashjflows.
j
b)jAjcashjdividendjpaidjtojstockholdersjisjreportedjonjthejstatementjofjchangesji
njstockholders'jequity.
j c)jAjcashjdividendjpaidjtojstockholdersjisjreportedjonjthejincomejstatement.
j
d)jThejbalancejsheetjreportsjthejendingjbalancesjofjpermanentjaccountsjasjofjthejla
stjdayjofjthejaccountingjperiod.
j
e)jChangesjinjretainedjearningsjduringjthejaccountingjperiodjarejreportedjonjth
ejincomejstatement.
, 7) Indicatejwhetherjeachjofjthejfollowingjstatementsjaboutjstockholders’jequityjisjtruejo
rjfalse.
j a)jExpensesjdecreasejretainedjearnings.
j
b)jStockholders'jequityjandjliabilitiesjcanjbejviewedjeitherjasjsourcesjofjassetsjo
rjclaimsjtojassetsjofjthejbusiness.
j c)jRetainedjearningsjisjincreasedjbyjloansjreceivedjfromjajbank.
j d)jDividendsjpaidjtojstockholdersjdecreasejcommonjstock.
j
e)jGenerally,jassetsjarejreportedjatjthejactualjpricejpaidjforjthemjwhenjpurchase
djregardlessjofjsubsequentjchangesjinjmarketjvalue.
8) JessupjCompanyjwasjfoundedjinjYearj1.jItjacquiredj$45,000jcashjbyjissuingjstockjtoji
nvestorsjandjanjadditionalj$15,000jcashjbyjborrowingjfromjcreditors.jDuringjYearj1jitjreceive
d
$25,000jcashjrevenuesjandjpaidj$32,000jinjcashjexpenses.jThejcompanyjthenjwentjoutjo
fjbusiness.
Required:
a) Explainjthejterm,j"businessjliquidation."
b) WhatjamountjofjcashjshouldjJessupjCompanyjhavejhadjonjhandjimmediatelyjbeforejgoin
gjoutjofjbusiness?
c) WhatjamountjofjcashjwilljJessup'sjcreditorsjreceive?
d) WhatjamountjofjcashjwilljJessup'sjstockholdersjreceive?
9) BatesjCompanyjenteredjintojthejfollowingjtransactionsjduringjitsjfirstjyearjinjbusines
s.jAssumejthatjalljtransactionsjinvolvejthejreceiptjorjpaymentjofjcash.
1) Issuedjcommonjstockjtojinvestorsjforj$25,000jcash.
2) Borrowedj$18,000jfromjthejlocaljbank.
3) Providedjservicesjtojcustomersjforj$28,000.
4) Paidjexpensesjamountingjtoj$21,400.
5) Purchasedjajplotjofjlandjcostingj$22,000.
6) Paidjajdividendjofj$15,000jtojitsjstockholders.
7) Repaidj$12,000jofjthejloanjlistedjinjitemj2.
Required:
(a) Filljinjthejthreejcolumnjheadingsjofjthejaccountingjequationjinjthejfirstjrowjofjthejtabl
ejshownjbelow.
(b) Showjthejeffectsjofjthejabovejtransactionsjonjthejaccountingjequation.
